Tips for Performance Appraisals in Small Companies [On Atlassian]

If you’re in a startup or a relatively small company, getting started on employee performance appraisals generally presents a dilemma. The ways larger companies do it can be a lot of work and not fit the culture. But doing nothing or being too unstructured has other problems.

I thought sharing how we developed our process might help others in the same boat. I also hope some of you might comment back what you’re doing that works.

Performance appraisals are only as good as your ability to give employees feedback continually and consistently. Otherwise a formal written appraisal can be a surprise, and bring unnecessary angst. We realized we were terribly inconsistent in coaching employees, so we hired a consultant trainer to train everyone in leadership on giving constructive feedback. This training included me and the founders, Mike and Scott.

I’m going to focus this, however, on what we have done to improve our written appraisals.

In our first few years, we had tried two different methods: one that was highly unstructured, and one that was too form-checkbox oriented, which took a lot of work. Thanks to our new HR Director Flanagan, we just went through a company-wide process that was simple yet yielded almost universally positive results.

Here’s what guided our process, and they’re my primary tips:

1. Keep it simple. This didn’t really sink in until I decided to seek out an outside HR expert. I wanted advice from someone in an innovative company we respect, and who thinks about HR creatively and differently. I remembered a lunch I had with the CEO of Netflix, Reed Hastings, years ago, and so without introduction, called Netflix’ Patty McCord, their Chief Talent Officer. Being the type of person who does not shield herself with bureaucracy, she took my call, and spent over a half hour discussing performance appraisal methods. Her primary advice was to keep it extremely simple if you have a small startup culture.
2. 360 Feedback. This may sound obvious, but I mean feedback from everyone who encircles your job. Managers need to hear what their teams think. Administrative people need to be able to comment on those giving them work. Peer feedback can be extremely powerful particularly when it comes to knowing your strengths.
3. Review everyone in the company at the same time. This goes for salaries too. It’s hard, but it ensures far greater consistency. You’ll also run the process much better.
4. Let employees evaluate the company. There’s no better time to collect ideas on how to improve the company. Collating this information can be interesting, and reveal the things you really need to address.
5. Don’t confuse operating goals with performance appraisals. A lot of performance appraisal methods call for employees and managers agreeing on goals at the conclusion of their review meetings. You need to be careful to not let this overlap with the natural goal setting you do in the business. At Atlassian, we already have clear goals in every team: developers have release schedules; marketing has web metrics, etc. We set goals by team at least quarterly. Goal setting in performance appraisals should not replace this. They should be about personal improvement only. If an individual’s goals should be contributing to their team goals, then don’t labor over this and create more work.

Here’s what we ended up with:

• Employees mades lists of who should review them, and HR checked the list for completeness.
• Everyone was asked to write comments on who they reviewed in two categories: Strengths and Areas to Improve.
• HR compiled all comments verbatim and anonymously into the appraisals
• Employees were also asked 4 questions:

  1. What are you proud of having done in 2006, and what do you think you could have done better?
  2. What 3 things would you do to improve your team?
  3. What 3 things would you look at improving Atlassian and/or its work environment?
  4. If you were going to set yourself goals for the next six months, what would they be?

• Employees received a compilation of the comments, and sat down with their manager to discuss the most important areas for focus, and to discuss the employee’s answers to the 4 questions

I can’t tell you how powerful it is to receive a list of direct comments from other employees on your performance. One of our engineers was so struck, he took the review home and put it on his refrigerator.

Hearing the nuance and subtlety of someone’s perspective, without filtering by some manager, makes the information more genuine and useful. I asked for feedback from everyone in our SF office and a number in Sydney and was blown away by 4 pages of comments (10 point font).

It’s obvious what you need to work on when the data points add up on a certain issue. The comments on strengths can be exhilarating frankly. It can be an extremely useful, introspective, and personal moment in the middle of all the intensity of daily work.

The beauty of this process is a manager did not have to sit down and write a review and check boxes which when done thoughtfully can take considerable time for an entire team. I can’t recommend the process more and would love to hear your learnings on the topic and share more specifics on our process.